After the dust has settled post the lower-than-expected 1Q15 results, we have cut our overall 2015F market EPS growth from 11.6% at the beginning of the year to just 6% at present, reflecting the current weak domestic economy.
In line with our reduced market EPS growth, we decrease our index target for 2015 to 5,100 from 5,800, after stripping out the Jokowi-related euphoria effect from the 2014 index level (i.e. 2013 index: 4,274 + 12% actual 2014 EPS growth + 6% expected 2015 EPS growth).
However, as we head into 2H15, we recommend investors with a medium-term view to look at our end-2016 index target of 5,500, in line with our market EPS growth expectation of around 8% for next year. Having said that, a solid progress on infrastructure-related projects could see investors beginning to price in 1H16 outlook, which could mean a rise to the 5,300 level (i.e. mid way between 5,100 and 5,500).
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